Stop the next gen making the same financial mistakes as us

Stop the next gen making the same financial mistakes as us

We’ve all made financial mistakes in this past. Many of these would have been prevented if we had learnt more about personal finance at school or college.

Last week I was lucky enough to speak with the London Institute of Banking and Finance – specifically their arm which focuses on financial education. The conversation was really engaging and got me thinking about how we’re doing young people a disservice with the lack of financial education on offer.

Financial education is seriously lacking. Improving this will help stop the next generation from making the same financial mistakes as we did.

In this post I’ll cover:

  1. Financial habits form early
  2. Wealth inequality is on the rise
  3. There’s a debt crisis
  4. Misinformation and scams are rife
  5. Financial mistakes stay with you for life

Financial habits form early

Personal finance habits can be formed as young as 7 years old.  

Most people have barely mentioned money to their children at this stage.

Will Rainey is hoping to change this. Aside from a successful blog, he has written a book full of fun stories to help teach children about money.

While discussing the intricacies of mortgages or stock market variations may not go down well – particularly with younger children, the basics about money can be taken on board.

Explaining spending and saving and how you know if you can afford items is a good starting point. It also makes maths lessons more practical!

If you establish these foundations at a young age, you can move onto more complicated financial concepts as children get older and (hopefully!) become more interested.

Child with parent at a laptop learning.

Wealth inequality is on the rise

Today’s young people need better financial education more than ever. Wealth inequality is on the rise and the generational wealth gap is increasing too.

While the rich continue to get richer, more and more fall below the poverty line.

Forbes’ annual ranking of the 400 richest Americans found the US’ three richest individuals (Bill Gates, Warren Buffett and Jeff Bezos) collectively hold more wealth than the bottom 50 percent, which equates to 63 million American households.

Hopefully, this will change –with some much needed government intervention. But, for now, young people need help to take control of their finances early to avoid getting left behind.

With young people being left behind financially, it is even more unfair that we are leaving them to fend for themselves when it comes to money education.

How do we expect them to avoid financial mistakes if we don’t give them the tools to do so?

There’s a debt crisis

Wealth inequality isn’t the only financial problem around. There’s a growing debt crisis.

According to money.co.uk, 78% of UK adults started 2021 in debt. This figure does not include mortgages, meaning just 22 percent don’t have some form of personal debt.

The most concerning thing is that 35 percent attribute their debt to ‘normal living expenses’. People simply can’t afford to live the life their leading.

This could be due to a range of factors, such as lifestyle inflation or simply spending too much money. But, for many, their income just doesn’t meet basic living requirements.

For some, financial mistakes lead them into debt. Having more robust financial education could help stop others falling into the same traps.

Misinformation and scams are rife

Misinformation is everywhere. You only have to scroll through Twitter, Instagram or TikTok to see the dubious financial “advice” on offer.

Given the prevalence of social media in our lives, it makes sense that young people take this information as a given and base their financial decisions on their favourite influencer’s posts.

Young people need to be given the tools to make decisions that will be right for their own personal circumstances, rather than doing something because they saw it on TikTok.

On top of this, there are more scams around than ever before.

In the past year, more than £2.3 billion was lost to scams. Which? says 413,553 instances of fraud were reported to Action Fraud in year to April, up 33% on previous year.

Teaching young people to be savvy and aware of scams will help protect them from handing over personal details and money to the wrong people.

Equal Pay Day - 4 pink piggy banks in a line

Financial mistakes stay with you for life

Sadly, financial mistakes can take a long time to rectify. It’s not as easy as flipping a switch and erasing the mistakes.

Even something as simple as opting out of your workplace pension in your early 20s can have a big knock on affect later in your life. Compound interest works wonders. Getting started early can save a panic later in life.

Other habits, like spending more than you earn and getting into debt, can be harder to resolve. It also has a knock-on effect on your future spending plans. The money you spend paying off debt is money you can’t put towards other financial goals or saving for your future.

Learning about and creating healthy financial habits from a young age can remove the pain and struggles financial mistakes can cause.

Don’t forget to follow me on social media @Katie20Percent to keep up to date with all my latest posts.

If you enjoyed this post on why we need better financial education, please like and share it with your friends and/or on social media. What are your thoughts on Black Friday? Will you be joining in the boycott or looking to nab yourself some bargains? Comment them below. I’d love to hear your thoughts!

2 responses to “Stop the next gen making the same financial mistakes as us”

  1. Having spent a good portion of my career developing financial education programs, I couldn’t agree more. I heard something quite alarming the other day at work. Someone had been taking “advice” from a social media influencer who said young people shouldn’t save for retirement—basically saying “why should we save for a future that we’re not guaranteed will happen?” WHAT??? I agree that the traditional School-Work-Retirement model is changing and the retirement most older boomers enjoyed will no longer exist. However, retirement aside, saving for your future is critical.

    Here in Ontario, our provincial government has finally introduced financial literacy in our high school curriculum. It’s about time but it’s not enough. Parents need to start educating their kids at a young age. The challenge is many parents aren’t good with money themselves so they risk passing on bad habits.

    Ultimately, I think it falls on governments and financial institutions to put out credible information on platforms that young people use. Or, we need to engage those influencers to provide credible information instead of misinformation.

    Well, that turned into quite the rant. Can you tell it’s a topic I’m passionate about?

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